Oversight: The Legal Services Board

A. Constitution

The LSB consists of a chair appointed by the Lord Chancellor, a Chief Executive of the Board and at least seven, but not more than ten, other persons appointed by the Lord Chancellor.^[748] The chair and a majority of members must be laypersons,^[749] broadly defined so as to exclude people who are, or who ever have been, any kind of lawyer.^[750] The Board may appoint staff and committees and delegate functions to either.^[751]

B.

i. Observing and Promoting the Regulatory Objectives

The duty of the LSB is to promote the regulatory objectives. The eight regulatory objectives identified by the LSA 2007 are:

----- protecting and promoting the public interest;

----- supporting the constitutional principle of the rule of law;

----- improving access to justice;

----- protecting and promoting the interests of consumers of legal services;

----- promoting competition in the provision of legal services;

----- encouraging an independent, strong, diverse and effective legal profession; ----- increasing public understanding of the citizen’s legal rights and duties; promoting and maintaining adherence to the professional principles.^[752]

The professional principles mentioned in the last statutory objective of the LSA 2007 require that persons authorised under the Act:

----- behave with independence and integrity;

----- maintain proper standards of work;

----- act in the best interests of their clients;

---- act with independence in the interests of justice;

---- comply and observe their duty to the court when appearing as an advocate in court or conducting litigation; and

---- keep affairs of clients confidential.^[753]

The regulatory objectives are somewhat contradictory. The elimination of professional distinctions in the pursuit of competition will undermine professional identity.

C. Functions of the Legal Services Board

The LSA 2007 specifies a range of functions that the LSB must perform. In perform­ing these functions it must keep in mind the regulatory objectives. The LSB aspires to base its pursuit of the objectives, and performance of the functions, on evidence. The LSB has produced and commissioned a range of research which it publishes on its website. The commitment to transparency is refreshing, even if research does not always support the claims made for it.

i. Exercising Regulatory Oversight

a. Making Rules

The LSB must make rules providing for the imposition of a levy on ‘leviable bodies’, which includes approved regulators, to cover the costs of the Board, the Office for Legal Complaints and the Lord Chancellor.^[754]

b. Approving Rule Changes by Approved Regulators

The LSB must approve some changes to the rules of the Solicitors Disciplinary Tribunal (SDT).^[755] It also has power to give directions to the SDT.^[756]

c. Developing Standards

The LSB must assist in the maintenance and development of standards by approved regulators of persons authorised by them to carry reserved legal activities, and the education and training of persons so authorised.^[757]

d. Formulating Policy

The LSB has an explicit and implicit role in formulating policy for the operation of the legal services market. An example of the explicit responsibility of LSB is its statu­tory duty to prepare and issue statements of policy with respect to the exercise of its functions regarding performance targets and monitoring, directions to approved regulators, public censure, financial penalties, intervention directions, cancellation of the designation of a body as an approved regulator and the cancellation of a designa­tion as a licensing authority.^[758]

The LSB also has other specific responsibilities in relation to policy.

The implicit role arises under the LSB’s general remit to promote the regulatory objectives and to maintain and develop standards. Two bodies are recognised by the LSA 2007 as having a special role in influencing policy. They are the Consumer Panel and the Office of Fair Trading (OFT). The latter will be replaced by the Competition and Markets Authority (CMA) in April 2014, when it will take over the OFT’s ancil­lary regulatory functions under the LSA 2007 and other legislation.^[763] The LSB was required to establish a Consumer Panel to represent the interests of consumers.^[764] The panel was to give a fair degree of representation to those using ‘in connection with businesses carried on by them, services provided by persons who are authorised persons in relation to activities which are reserved legal activities’.^[765] The LSB is bound to consider any representation made to it by the Consumer Panel and to give notice, with reasons, for disagreeing with any such representation.^[766] The LSB can also request that the Consumer Panel carry out research for it, which the LSB must then consider.^[767]

The CMA will report to the LSB any regulatory arrangement that it considers prevents, restricts or distorts competition to any significant extent.^[768] The LSB must allow the relevant approved regulators 28 days to make representations on any such report. It must also inform the CMA of any action it proposes to take. If the CMA is not satisfied it can refer the matter to the Lord Chancellor Ultimately, the Lord Chancellor can direct the LSB to take action in respect of any matter raised in the LSB’s report.^[769]

e.

The Board has an important function in giving guidance:

(a) about the operation of this Act and of any order made under it;

(b) about the operation of any rules made by the Board under this Act;

(c) about any matter relating to the Board’s functions;

(d) for the purpose of meeting the regulatory objectives;

(e) about the content of licensing rules;

(f) about any other matters about which it appears to the Board to be desirable to give guidance.^[770]

The guidance may take any form and may be published generally. A recent example is a consultation containing draft guidance to regulators on education and training.^[771]

f. Monitoring Approved Regulators

The LSA 2007 states that the LSB’s ‘principal role is the oversight of approved regulators’.^[772] Therefore, most of the LSB’s powers, as opposed to duties, are exercis­able over approved regulators.

D. Powers of the Legal Services Board

The LSA 2007 gives the LSB specific powers. The most important powers relate to the oversight of approved regulators and the capacity to act as an approved regulator.

i. Obtaining Information from Approved Regulators

The LSB can require approved regulators to provide information or documents and summon a representative to attend to explain any information provided.^[773]

ii. Sanctioning Approved Regulators

Where the act or omission of an approved regulator adversely impacts on regulatory objectives, the LSB may set performance targets for it, or direct it to set targets for itself.^[774] These performance targets may come with conditions to which they must conform.^[775]

In more serious cases, the LSB may direct an approved regulator to mitigate any adverse impact on regulatory objectives or remedy or mitigate the effect of any breach of the requirements for separation of functions.⁸⁴ Such a direction is enforceable on application to the High Court.⁸⁵ If the LSB considers it appropriate, it can impose penalties, public censure, fines and intervene in the activities of an approved regulator.⁸⁶ Ultimately, it can recommend to the Lord Chancellor that the designation of an approved body be cancelled.⁸⁷

iii. Acting as an Approved Regulator

The Lord Chancellor can designate the LSB an approved regulator of reserved activities where an approved regulator’s designation is cancelled or a new legal activity becomes reserved.⁸⁸ The LSB can then carry out normal regulatory functions, such as making practice and conduct rules.⁸⁹ The LSB is also a licensing authority for licensed bodies, better known as Alternative Business Structures,⁹⁰ and can also designate approved regulators as licensing authorities in relation to one or more reserved legal activities.⁹¹

VIII.